Shareholder
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A shareholder (in the United States often referred to as stockholder) of
The influence of shareholders on the business is determined by the shareholding percentage owned. Shareholders of corporations are legally separate from the corporation itself. They are generally not liable for the corporation's debts, and the shareholders' liability for company debts is said to be limited to the unpaid share price unless a shareholder has offered guarantees. The corporation is not required to record the beneficial ownership of a shareholding, only the owner as recorded on the register. When more than one person is on the record as owners of a shareholding, the first one on the record is taken to control the shareholding, and all correspondence and communication by the company will be with that person.[clarification needed]
Shareholders may have acquired their shares in the
Shareholders are considered by some to be a
Types
A
Primarily, there are two types of shareholders.
An individual or legal entity that owns
Preference shareholders are owners of
Rights
Subject to the applicable laws, the rules of the corporation and any shareholders' agreement, shareholders may have the right:
- To sell their shares.[5]
- To vote on the directors nominated by the board of directors.[5]
- To nominate directors (although this is very difficult in practice because of minority protections) and propose shareholder resolutions.[5]
- To vote on mergers and changes to the corporate charter.[5]
- To dividends if they are declared.[5]
- To access certain information; for publicly traded companies, this information is normally publicly available.[5]
- To sue the company for violation of fiduciary duty.[5]
- To purchase new shares issued by the company.
- To vote on & file shareholder resolutions.
- To vote on management proposals.
- To what assets remain after a liquidation.
The above-mentioned rights can be generally classified into (1) cash-flow rights and (2) voting rights. While the value of shares is mainly driven by the cash-flow rights that they carry ("cash is king"), voting rights can also be valuable. The value of shareholders' cash-flow rights can be computed by discounting future free cash flows. The value of shareholders' voting rights can be computed by four methods:
- The difference between voting shares and non-voting shares (dual-class approach).[6]
- The difference between the price paid in a block-trade transaction and the subsequent price paid in a smaller transaction on exchanges (block-trade approach).[7]
- The implied voting value obtained from option prices.[8]
- The excess lending fee over voting events.[9]
See also
- Beneficial ownership
- Business valuation
- Class action
- Class A share
- Class B share
- Corporate governance
- Employee stock ownership
- Investor
- Real party in interest
- Shareholder value
- Social ownership
- Street name securities
References
- ^ Fontinelle, Amy (26 November 2003). "Shareholder". investopedia.com.
- ^ "Company shareholders".
- ^ "Shareholder – Definition, Roles, and Types of Shareholders". Corporate Finance Institute. Retrieved 2019-02-19.
- ^ Wright, Tiffany C. "Common Vs. Preferred Stock for Financing a Private Company". azcentral.com. Archived from the original on Jun 24, 2021. Retrieved 23 June 2021.
- ^ a b c d e f g Velasco, Julian (2006). "The Fundamental Rights of the Shareholder" (PDF). UC Davis L. Rev. 40: 407–467. Archived (PDF) from the original on Apr 17, 2018. Retrieved 16 April 2018.
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- doi:10.3386/w8711.
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